Wal-Mart falls, firm checking corruption claims

SamMamudi

GregMorcroft

NEW YORK (MarketWatch) — Wal-Mart Stores Inc. shares fell more than 4% in Monday pre-open trading after the firm said over the weekend that that it is looking into a newspaper’s claims that employees at a subsidiary bribed Mexican officials over several years and that executives at its headquarters in the U.S. shut down any thorough investigation of the allegations.

Wal-Mart
WMT, +1.35%WMT, +1.35%
the world’s largest retailer, said in a lengthy statement on Saturday that it has told federal authorities about the matter and that its outside investigators will continue to meet with officials from the Department of Justice and Securities and Exchange Commission.

Wal-Mart shares fell 4.6% in preopen trading on Monday.

The thrust of the claims made by the New York Times was that in 2005 executives at Wal-Mart’s Bentonville, Ark. headquarters heard allegations of bribery of Mexican officials, possibly totaling $24 million over hundreds of payments, but didn’t discipline leaders at Wal-Mart de Mexico (WMT) or notify U.S. or Mexican law enforcement officials.

Senior executives, said the Times, “focused more on damage control than on rooting out wrongdoing.”

The Times reported that an investigation into the Mexico bribery claims was put mainly in the hands of Wal-Mart’s general counsel in Mexico — the man accused of authorizing the bribes — while the executive who allegedly oversaw the bulk of the bribes, Eduardo Castro-Wright, was promoted to Wal-Mart vice chairman in 2008.

The Times also claims that Wal-Mart’s then-Chief Executive Lee Scott scolded internal investigators at the time for being too aggressive, while current CEO Michael Duke knew of the claims.

“Many of the alleged activities in the New York Times article are more than six years old,” said David Tovar, vice president of corporate communications at Wal-Mart in the statement. “If these allegations are true, it is not a reflection of who we are or what we stand for. We are deeply concerned by these allegations and are working aggressively to determine what happened.”

“We are working hard to understand what occurred in Bentonville more than six years ago and are committed to conducting a complete investigation before forming conclusions,” added Tovar. “We don’t want to speculate or weave stories from incomplete inquiries and limited recollections, as others might do.”

“Unfortunately, we realize that, at this point, there are some unanswered questions. We wish we could say more but we will not jeopardize the integrity of the investigation.”

Tovar noted in his statement that Wal-Mart had informed shareholders of the investigation in a December filing. The SEC filing said Wal-Mart didn’t believe that the claims “will have a material adverse effect on our business.”

The Times’ story, however, claims there is “credible evidence that bribery played a persistent and significant role in Wal-Mart’s rapid growth in Mexico.”

Wal-Mart is Mexico’s largest private employer, said the paper, with 209,000 workers in the country.

Tovar said Wal-Mart recently tightened its internal controls, hiring a U.S. Foreign Corrupt Practices Act compliance director in Mexico who reports directly to executives in Bentonville.

“In the spring of 2011, we initiated a worldwide review of our anticorruption program,” said Tovar. “We are taking a deep look at our policies and procedures in every country in which we operate. This includes developing and implementing recommendations for FCPA training, anticorruption safeguards, and internal controls.”

“In a large global enterprise such as Wal-Mart, sometimes issues arise despite our best efforts and intentions,” he added. “When they do, we take them seriously and act as quickly as possible to understand what happened. We take action and work to implement changes so the issue doesn’t happen again. That’s what we’re doing today.”

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